---
kind: "section"
citation: "42 U.S.C. § 1395w–114a"
title: "42"
title_heading: "The Public Health and Welfare"
number: "1395w–114a"
heading: "Medicare coverage gap discount program"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/42/1395w-114a"
units:
  - "Chapter 7 — Social Security"
  - "Subchapter XVIII — Health Insurance for Aged and Disabled"
  - "Part D — Voluntary Prescription Drug Benefit Program"
  - "Subpart 2 — prescription drug plans; pdp sponsors; financing"
---

# §1395w–114a. Medicare coverage gap discount program

- (a) **Establishment—** Subject to [subsection (h)](#h), the [Secretary](/usc/42/1301.md?p=a-6) shall establish a Medicare coverage gap discount program (in this section referred to as the “program”) by not later than January 1, 2011. Under the program, the [Secretary](/usc/42/1301.md?p=a-6) shall enter into agreements described in [subsection (b)](#b) with manufacturers and provide for the performance of the duties described in [subsection (c)(1)](#c-1). The [Secretary](/usc/42/1301.md?p=a-6) shall establish a model agreement for use under the program by not later than 180 days after March 23, 2010, in consultation with manufacturers, and allow for comment on such model agreement.
- (b) **Terms of agreement—**
  - (1) **In general—**
    - (A) **Agreement—** An agreement under this section shall require the manufacturer to provide applicable beneficiaries access to discounted prices for applicable [drugs](/usc/42/11851.md?p=4) of the manufacturer.
    - (B) **Provision of discounted prices at the point-of-sale—** Except as provided in [subsection (c)(1)(A)(iii)](#c-1-A-iii), such discounted prices shall be provided to the applicable beneficiary at the pharmacy or by the mail order service at the point-of-sale of an applicable [drug](/usc/42/11851.md?p=4).
    - (C) **Timing of agreement—**
      - (i) **Special rule for 2011—** In order for an agreement with a manufacturer to be in effect under this section with respect to the period beginning on January 1, 2011, and ending on December 31, 2011, the manufacturer shall enter into such agreement not later than not later than[^1] 30 days after the date of the establishment of a model agreement under [subsection (a)](#a).
      - (ii) **2012 and subsequent years—** In order for an agreement with a manufacturer to be in effect under this section with respect to plan year 2012 or a subsequent plan year, the manufacturer shall enter into such agreement (or such agreement shall be renewed under [paragraph (4)(A)](#b-4-A)) not later than January 30 of the preceding year.
  - (2) **Provision of appropriate data—** Each manufacturer with an agreement in effect under this section shall collect and have available appropriate data, as determined by the [Secretary](/usc/42/1301.md?p=a-6), to ensure that it can demonstrate to the [Secretary](/usc/42/1301.md?p=a-6) compliance with the requirements under the program.
  - (3) **Compliance with requirements for administration of program—** Each manufacturer with an agreement in effect under this section shall comply with requirements imposed by the [Secretary](/usc/42/1301.md?p=a-6) or a third party with a contract under [subsection (d)(3)](#d-3), as applicable, for purposes of administering the program, [including](/usc/42/1301.md?p=b) any determination under [clause (i)](#c-1-A-i) of subsection (c)(1)(A) or procedures established under such [subsection (c)(1)(A)](#c-1-A).
  - (4) **Length of agreement—**
    - (A) **In general—** An agreement under this section shall be effective for an initial period of not less than 18 months and shall be automatically renewed for a period of not less than 1 year unless terminated under [subparagraph (B)](#b-4-B).
    - (B) **Termination—**
      - (i) **By the Secretary—** The [Secretary](/usc/42/1301.md?p=a-6) may provide for termination of an agreement under this section for a knowing and willful [violation](/usc/42/2000e–16a.md?p=c) of the requirements of the agreement or other good cause shown. Such termination shall not be effective earlier than 30 days after the date of notice to the manufacturer of such termination. The [Secretary](/usc/42/1301.md?p=a-6) shall provide, upon request, a manufacturer with a hearing concerning such a termination, and such hearing shall take place prior to the effective date of the termination with sufficient time for such effective date to be repealed if the [Secretary](/usc/42/1301.md?p=a-6) determines appropriate.
      - (ii) **By a manufacturer—** A manufacturer may terminate an agreement under this section for any reason. Any such termination shall be effective, with respect to a plan year—
        - (I) if the termination occurs before January 30 of a plan year, as of the day after the end of the plan year; and
        - (II) if the termination occurs on or after January 30 of a plan year, as of the day after the end of the succeeding plan year.
      - (iii) **Effectiveness of termination—** Any termination under this subparagraph shall not affect discounts for applicable [drugs](/usc/42/11851.md?p=4) of the manufacturer that are due under the agreement before the effective date of its termination.
      - (iv) **Notice to third party—** The [Secretary](/usc/42/1301.md?p=a-6) shall provide notice of such termination to a third party with a contract under [subsection (d)(3)](#d-3) within not less than 30 days before the effective date of such termination.
- (c) **Duties described and special rule for supplemental benefits—**
  - (1) **Duties described—** The duties described in this subsection are the following:
    - (A) **Administration of program—** Administering the program, [including](/usc/42/1301.md?p=b)—
      - (i) the determination of the amount of the discounted price of an applicable [drug](/usc/42/11851.md?p=4) of a manufacturer;
      - (ii) except as provided in [clause (iii)](#c-1-A-iii), the establishment of procedures under which discounted prices are provided to applicable beneficiaries at pharmacies or by mail order service at the point-of-sale of an applicable [drug](/usc/42/11851.md?p=4);
      - (iii) in the case where, during the period beginning on January 1, 2011, and ending on December 31, 2011, it is not practicable to provide such discounted prices at the point-of-sale (as described in [clause (ii)](#c-1-A-ii)), the establishment of procedures to provide such discounted prices as soon as practicable after the point-of-sale;
      - (iv) the establishment of procedures to ensure that, not later than the applicable number of calendar days after the dispensing of an applicable [drug](/usc/42/11851.md?p=4) by a pharmacy or mail order service, the pharmacy or mail order service is reimbursed for an amount equal to the difference between—
        - (I) the negotiated price of the applicable [drug](/usc/42/11851.md?p=4); and
        - (II) the discounted price of the applicable [drug](/usc/42/11851.md?p=4);
      - (v) the establishment of procedures to ensure that the discounted price for an applicable [drug](/usc/42/11851.md?p=4) under this section is applied before any coverage or financial assistance under other health benefit plans or programs that provide coverage or financial assistance for the purchase or provision of prescription [drug](/usc/42/11851.md?p=4) coverage on behalf of applicable beneficiaries as the [Secretary](/usc/42/1301.md?p=a-6) may specify;
      - (vi) the establishment of procedures to implement the special rule for supplemental benefits under [paragraph (2)](#c-2); and
      - (vii) providing a reasonable dispute resolution mechanism to resolve disagreements between manufacturers, applicable beneficiaries, and the third party with a contract under [subsection (d)(3)](#d-3).
    - (B) **Monitoring compliance—**
      - (i) **In general—** The [Secretary](/usc/42/1301.md?p=a-6) shall monitor compliance by a manufacturer with the terms of an agreement under this section.
      - (ii) **Notification—** If a third party with a contract under [subsection (d)(3)](#d-3) determines that the manufacturer is not in compliance with such agreement, the third party shall notify the [Secretary](/usc/42/1301.md?p=a-6) of such noncompliance for appropriate enforcement under [subsection (e)](#e).
    - (C) **Collection of data from prescription drug plans and MA–PD plans—** The [Secretary](/usc/42/1301.md?p=a-6) may collect appropriate data from [prescription drug plans](/usc/42/1395w–151.md?p=a-14) and [MA–PD plans](/usc/42/1395w–151.md?p=a-9) in a timeframe that allows for discounted prices to be provided for applicable [drugs](/usc/42/11851.md?p=4) under this section.
  - (2) **Special rule for supplemental benefits—** For plan year 2011 and each subsequent plan year, in the case where an applicable beneficiary has supplemental benefits with respect to applicable [drugs](/usc/42/11851.md?p=4) under the [prescription drug plan](/usc/42/1395w–151.md?p=a-14) or [MA–PD plan](/usc/42/1395w–151.md?p=a-9) that the applicable beneficiary is enrolled in, the applicable beneficiary shall not be provided a discounted price for an applicable [drug](/usc/42/11851.md?p=4) under this section until after such supplemental benefits have been applied with respect to the applicable [drug](/usc/42/11851.md?p=4).
- (d) **Administration—**
  - (1) **In general—** Subject to [paragraph (2)](#d-2), the [Secretary](/usc/42/1301.md?p=a-6) shall provide for the implementation of this section, [including](/usc/42/1301.md?p=b) the performance of the duties described in [subsection (c)(1)](#c-1).
  - (2) **Limitation—**
    - (A) **In general—** Subject to [subparagraph (B)](#d-2-B), in providing for such implementation, the [Secretary](/usc/42/1301.md?p=a-6) shall not receive or distribute any funds of a manufacturer under the program.
    - (B) **Exception—** The limitation under [subparagraph (A)](#d-2-A) shall not apply to the [Secretary](/usc/42/1301.md?p=a-6) with respect to [drugs](/usc/42/11851.md?p=4) dispensed during the period beginning on January 1, 2011, and ending on December 31, 2011, but only if the [Secretary](/usc/42/1301.md?p=a-6) determines that the exception to such limitation under this subparagraph is necessary in order for the [Secretary](/usc/42/1301.md?p=a-6) to begin implementation of this section and provide applicable beneficiaries timely access to discounted prices during such period.
  - (3) **Contract with third parties—** The [Secretary](/usc/42/1301.md?p=a-6) shall enter into a contract with 1 or more third parties to administer the requirements established by the [Secretary](/usc/42/1301.md?p=a-6) in order to carry out this section. At a minimum, the contract with a third party under the preceding sentence shall require that the third party—
    - (A) receive and transmit information between the [Secretary](/usc/42/1301.md?p=a-6), manufacturers, and other individuals or entities the [Secretary](/usc/42/1301.md?p=a-6) determines appropriate;
    - (B) receive, distribute, or facilitate the distribution of funds of manufacturers to appropriate individuals or entities in order to meet the obligations of manufacturers under agreements under this section;
    - (C) provide adequate and timely information to manufacturers, consistent with the agreement with the manufacturer under this section, as necessary for the manufacturer to fulfill its obligations under this section; and
    - (D) permit manufacturers to conduct periodic audits, directly or through contracts, of the data and information used by the third party to determine discounts for applicable [drugs](/usc/42/11851.md?p=4) of the manufacturer under the program.
  - (4) **Performance requirements—** The [Secretary](/usc/42/1301.md?p=a-6) shall establish performance requirements for a third party with a contract under [paragraph (3)](#d-3) and safeguards to protect the [independence](/usc/42/242q–4.md?p=1-B) and integrity of the activities carried out by the third party under the program under this section.
  - (5) **Implementation—** The [Secretary](/usc/42/1301.md?p=a-6) may implement the program under this section by program instruction or otherwise.
  - (6) **Administration—** [Chapter 35](/usc/44/ch35.md) of title 44 shall not apply to the program under this section.
- (e) **Enforcement—**
  - (1) **Audits—** Each manufacturer with an agreement in effect under this section shall be subject to periodic audit by the [Secretary](/usc/42/1301.md?p=a-6).
  - (2) **Civil money penalty—**
    - (A) **In general—** The [Secretary](/usc/42/1301.md?p=a-6) shall impose a civil money penalty on a manufacturer that fails to provide applicable beneficiaries discounts for applicable [drugs](/usc/42/11851.md?p=4) of the manufacturer in accordance with such agreement for each such failure in an amount the [Secretary](/usc/42/1301.md?p=a-6) determines is commensurate with the sum of—
      - (i) the amount that the manufacturer would have paid with respect to such discounts under the agreement, which will then be used to pay the discounts which the manufacturer had failed to provide; and
      - (ii) 25 percent of such amount.
    - (B) **Application—** The provisions of [section 1320a–7a of this title](/usc/42/1320a–7a.md) (other than subsections [(a)](#a) and [(b)](#b)) shall apply to a civil money penalty under this paragraph in the same manner as such provisions apply to a penalty or proceeding under [section 1320a–7a(a) of this title](/usc/42/1320a–7a.md?p=a).
- (f) **Clarification regarding availability of other covered part D drugs—** Nothing in this section shall prevent an applicable beneficiary from purchasing a [covered part D drug](/usc/42/1395w–151.md?p=a-2) that is not an applicable [drug](/usc/42/11851.md?p=4) ([including](/usc/42/1301.md?p=b) a generic [drug](/usc/42/11851.md?p=4) or a [drug](/usc/42/11851.md?p=4) that is not on the formulary of the [prescription drug plan](/usc/42/1395w–151.md?p=a-14) or [MA–PD plan](/usc/42/1395w–151.md?p=a-9) that the applicable beneficiary is enrolled in).
- (g) **Definitions—** In this section:
  - (1) **Applicable beneficiary—** The term “applicable beneficiary” means an individual who, on the date of dispensing a [covered part D drug](/usc/42/1395w–151.md?p=a-2)—
    - (A) is enrolled in a [prescription drug plan](/usc/42/1395w–151.md?p=a-14) or an [MA–PD plan](/usc/42/1395w–151.md?p=a-9);
    - (B) is not enrolled in a qualified retiree [prescription drug plan](/usc/42/1395w–151.md?p=a-14);
    - (C) is not entitled to an income-related subsidy under [section 1395w–114(a) of this title](/usc/42/1395w–114.md?p=a); and
    - (D) who—
      - (i) has reached or exceeded the [initial coverage limit](/usc/42/1395w–151.md?p=a-6) under [section 1395w–102(b)(3) of this title](/usc/42/1395w–102.md?p=b-3) during the year; and
      - (ii) has not incurred costs for [covered part D drugs](/usc/42/1395w–151.md?p=a-2) in the year equal to the annual out-of-pocket threshold specified in [section 1395w–102(b)(4)(B) of this title](/usc/42/1395w–102.md?p=b-4-B).
  - (2) **Applicable drug—** The term “applicable [drug](/usc/42/11851.md?p=4)” means, with respect to an applicable beneficiary, a [covered part D drug](/usc/42/1395w–151.md?p=a-2)—
    - (A) approved under a new [drug](/usc/42/11851.md?p=4) application under [section 355(b) of title 21](/usc/21/355.md?p=b) or, in the case of a biologic product, licensed under [section 262 of this title](/usc/42/262.md) (other than, with respect to a plan year before 2019, a product licensed under [subsection (k)](/usc/42/262.md?p=k) of such section 262); and
    - (B)
      - (i) if the [PDP sponsor](/usc/42/1395w–151.md?p=a-13) of the [prescription drug plan](/usc/42/1395w–151.md?p=a-14) or the MA organization offering the [MA–PD plan](/usc/42/1395w–151.md?p=a-9) uses a formulary, which is on the formulary of the [prescription drug plan](/usc/42/1395w–151.md?p=a-14) or [MA–PD plan](/usc/42/1395w–151.md?p=a-9) that the applicable beneficiary is enrolled in;
      - (ii) if the [PDP sponsor](/usc/42/1395w–151.md?p=a-13) of the [prescription drug plan](/usc/42/1395w–151.md?p=a-14) or the MA organization offering the [MA–PD plan](/usc/42/1395w–151.md?p=a-9) does not use a formulary, for which benefits are available under the [prescription drug plan](/usc/42/1395w–151.md?p=a-14) or [MA–PD plan](/usc/42/1395w–151.md?p=a-9) that the applicable beneficiary is enrolled in; or
      - (iii) is provided through an exception or appeal.
  - (3) **Applicable number of calendar days—** The term “applicable number of calendar days” means—
    - (A) with respect to claims for reimbursement submitted electronically, 14 days; and
    - (B) with respect to claims for reimbursement submitted otherwise, 30 days.
  - (4) **Discounted price—**
    - (A) **In general—** The term “discounted price” means 50 percent (or, with respect to a plan year after plan year 2018, 30 percent) of the negotiated price of the applicable [drug](/usc/42/11851.md?p=4) of a manufacturer.
    - (B) **Clarification—** Nothing in this section shall be construed as affecting the responsibility of an applicable beneficiary for payment of a dispensing fee for an applicable [drug](/usc/42/11851.md?p=4).
    - (C) **Special case for certain claims—** In the case where the entire amount of the negotiated price of an individual claim for an applicable [drug](/usc/42/11851.md?p=4) with respect to an applicable beneficiary does not fall at or above the [initial coverage limit](/usc/42/1395w–151.md?p=a-6) under [section 1395w–102(b)(3) of this title](/usc/42/1395w–102.md?p=b-3) and below the annual out-of-pocket threshold specified in [section 1395w–102(b)(4)(B) of this title](/usc/42/1395w–102.md?p=b-4-B) for the year, the manufacturer of the applicable [drug](/usc/42/11851.md?p=4) shall provide the discounted price under this section on only the portion of the negotiated price of the applicable [drug](/usc/42/11851.md?p=4) that falls at or above such [initial coverage limit](/usc/42/1395w–151.md?p=a-6) and below such annual out-of-pocket threshold.
  - (5) **Manufacturer—** The term “manufacturer” means any entity which is engaged in the production, preparation, propagation, compounding, conversion, or processing of prescription [drug](/usc/42/11851.md?p=4) products, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis. Such term does not include a wholesale distributor of [drugs](/usc/42/11851.md?p=4) or a retail pharmacy licensed under [State](/usc/42/619.md?p=5) law.
  - (6) **Negotiated price—** The term “negotiated price” has the meaning given such term in section 423.100 of title 42, Code of Federal Regulations (as in effect on March 23, 2010), except that such negotiated price shall not include any dispensing fee for the applicable [drug](/usc/42/11851.md?p=4).
  - (7) **Qualified retiree prescription drug plan—** The term “qualified retiree [prescription drug plan](/usc/42/1395w–151.md?p=a-14)” has the meaning given such term in [section 1395w–132(a)(2) of this title](/usc/42/1395w–132.md?p=a-2).
- (h) **Sunset of program—**
  - (1) **In general—** The program shall not apply with respect to applicable [drugs](/usc/42/11851.md?p=4) dispensed on or after January 1, 2025, and, subject to [paragraph (2)](#h-2), agreements under this section shall be terminated as of such date.
  - (2) **Continued application for applicable drugs dispensed prior to sunset—** The provisions of this section ([including](/usc/42/1301.md?p=b) all responsibilities and duties) shall continue to apply on and after January 1, 2025, with respect to applicable [drugs](/usc/42/11851.md?p=4) dispensed prior to such date.

## Footnotes

[^1]: So in original. Second “not later than” probably should not appear.

## Source credit

(Aug. 14, 1935, ch. 531, title XVIII, § 1860D–14A, as added Pub. L. 111–148, title III, § 3301(b), Mar. 23, 2010, 124 Stat. 462; amended Pub. L. 111–152, title I, § 1101(b)(2), Mar. 30, 2010, 124 Stat. 1037; Pub. L. 115–123, div. E, title XII, §§ 53113, 53116(b), Feb. 9, 2018, 132 Stat. 305, 307; Pub. L. 117–169, title I, § 11201(c)(2), Aug. 16, 2022, 136 Stat. 1888.)

## Notes

### Editorial Notes

### Amendments

2022—Subsec. (a). Pub. L. 117–169, § 11201(c)(2)(A), substituted “Subject to subsection (h), the Secretary” for “The Secretary”.

Subsec. (h). Pub. L. 117–169, § 11201(c)(2)(B), added subsec. (h).

2018—Subsec. (g)(2)(A). Pub. L. 115–123, § 53113, inserted “, with respect to a plan year before 2019,” after “other than”.

Subsec. (g)(4)(A). Pub. L. 115–123, § 53116(b), inserted “(or, with respect to a plan year after plan year 2018, 30 percent)” after “50 percent”.

2010—Subsec. (a). Pub. L. 111–152, § 1101(b)(2)(A), substituted “January 1, 2011” for “July 1, 2010” and “180 days after March 23, 2010” for “April 1, 2010”.

Subsec. (b)(1)(C)(i). Pub. L. 111–152, § 1101(b)(2)(B)(i), which directed the amendment of subpar. (C) by striking out “2010 and” in the heading, was executed by striking “2010 and” before “2011” in cl. (i) heading to reflect the probable intent of Congress.

Pub. L. 111–152, § 1101(b)(2)(B)(ii), (iii), substituted “January 1, 2011” for “July 1, 2010” and “not later than 30 days after the date of the establishment of a model agreement under subsection (a)” for “May 1, 2010”.

Subsec. (c)(1)(A)(iii). Pub. L. 111–152, § 1101(b)(2)(C)(i), substituted “January 1, 2011, and ending on December 31, 2011” for “July 1, 2010, and ending on December 31, 2011”.

Subsec. (c)(2). Pub. L. 111–152, § 1101(b)(2)(C)(ii), substituted “2011” for “2010”.

Subsec. (d)(2)(B). Pub. L. 111–152, § 1101(b)(2)(D), substituted “January 1, 2011, and ending on December 31, 2011” for “July 1, 2010, and ending on December 31, 2010”.

Subsec. (g)(1). Pub. L. 111–152, § 1101(b)(2)(E)(i), substituted “a covered part D drug” for “an applicable drug” in introductory provisions.

Subsec. (g)(1)(C) to (E). Pub. L. 111–152, § 1101(b)(2)(E)(ii)–(iv), inserted “and” at end of subpar. (C), redesignated subpar. (E) as (D), and struck out former subpar. (D) which read as follows: “is not subject to a reduction in premium subsidy under section 1395r(i) of this title; and”.