Cost-sharing subsidy

(a) Full subsidy eligible individuals. Full subsidy eligible individuals are entitled to the following:

(1) Elimination of the annual deductible under § 423.104(d)(1).

(2) Reduction in cost-sharing for all covered Part D drugs covered under the PDP or MA-PD plan below the out-of-pocket limit (under § 423.104), including for years preceding 2025, Part D drugs covered under the PDP or MA-PD plan obtained after the initial coverage limit (under § 423.104(d)(4)), as follows:

(ii) Full-benefit dual-eligible individuals who are institutionalized or who are receiving home and community-based services have no cost-sharing for Part D drugs covered under their PDP or MA-PD plans.

(iii) Full-benefit dual eligible individuals with incomes that do not exceed 100 percent of the Federal poverty line applicable to the individual's family size are subject to cost-sharing for covered Part D drugs equal to the lesser of:

(A) A copayment amount of not more than $1 for a generic drug, biological product for which an application under section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is approved, or preferred drugs that are multiple source (as defined under section 1927(k)(7)(A)(i) of the Act) or $3 for any other drug in 2006, or for years after 2006 the amounts specified in this paragraph (a)(2)(iii)(A) for the percentage increase in the Consumer Price Index specified in paragraph (d) of this section, rounded to the nearest multiple of 5 cents or 10 cents, respectively; or

(B) The copayment amount charged to other individuals under this paragraph (a)(2)(i) of this section.

(3) Elimination of all cost-sharing for covered Part D drugs covered under the PDP or MA-PD plan above the out-of-pocket limit (under § 423.104(d)(5)).

(b) Other low-income subsidy eligible individuals. Other low-income subsidy eligible individuals are entitled to the following:

(1) In 2006, reduction in the annual deductible to $50. This amount is increased each year beginning in 2007 by the annual percentage increase in average per capita aggregate expenditures for Part D drugs, rounded as specified under § 423.104(d)(5)(iv) to the nearest multiple of $1.

(2) Fifteen percent coinsurance for all covered Part D drugs obtained after the annual deductible under the plan up to the out-of-pocket limit (under § 423.104(d)(5)(iii)).

(3) For covered Part D drugs above the out-of-pocket limit (under § 423.104(d)(5)(iii)) in 2006, copayments not to exceed $2 for a generic drug, biological product for which an application under section 351(k) of the Public Health Service Act (42 U.S.C. 262(k)) is approved, or preferred drugs that are multiple source drugs (as defined under section 1927(k)(7)(A)(i) of the Act) and $5 for any other drug. For years beginning in 2007, the amounts specified in § 423.104(d)(5)(i)(A)(2), rounded to the nearest multiple of 5 cents.

(c) When the out-of-pocket cost for a covered Part D drug under a Part D sponsor's plan benefit package is less than the maximum allowable copayment, coinsurance or deductible amounts under paragraphs (a) and (b) of this section, the Part D sponsor may only charge the lower benefit package amount.

(d) Annual percentage increase in consumer price index (CPI)—(1) General. The annual percentage increase in consumer price index (CPI) for each year is equal to the annual percentage increase in the CPI in the United States for all items per a U.S. city average and is based on data for the 12-month period ending in September of the previous year.

(2) Calculating the annual percentage increase in CPI. The annual percentage increase is the product of the annual percentage trend (as defined in subparagraph (d)(3) of this section) and a multiplicative update (as defined in subparagraph (d)(4) of this section).

(3) Annual percentage trend. The annual percentage trend for a given year is the ratio of the CPI in the previous year (numerator) to the CPI 2 years prior to the given year (denominator).

(4) Multiplicative update. The multiplicative update for a given year is the ratio of the product of the annual percentage trends for all prior recorded years, as revised and updated with the most recent available data (numerator) to the product of the annual percentage trends in prior recorded years as published in the previous year's rate announcement (denominator).