---
kind: "section"
citation: "42 U.S.C. § 1395w–114b"
title: "42"
title_heading: "The Public Health and Welfare"
number: "1395w–114b"
heading: "Manufacturer rebate for certain drugs with prices increasing faster than inflation"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/42/1395w-114b"
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–114b. Manufacturer rebate for certain drugs with prices increasing faster than inflation

- (a) **Requirements—**
  - (1) **Secretarial provision of information—** Not later than 9 months after the end of each applicable period (as defined in [subsection (g)(7)](#g-7)), subject to [paragraph (3)](#a-3), the [Secretary](/usc/42/1301.md?p=a-6) shall, for each part D rebatable [drug](/usc/42/11851.md?p=4), report to each manufacturer of such part D rebatable [drug](/usc/42/11851.md?p=4) the following for such period:
    - (A) The amount (if any) of the excess annual manufacturer price increase described in [subsection (b)(1)(A)(ii)](#b-1-A-ii) for each dosage form and strength with respect to such [drug](/usc/42/11851.md?p=4) and period.
    - (B) The rebate amount specified under [subsection (b)](#b) for each dosage form and strength with respect to such [drug](/usc/42/11851.md?p=4) and period.
  - (2) **Manufacturer requirements—** For each applicable period, the manufacturer of a part D rebatable [drug](/usc/42/11851.md?p=4), for each dosage form and strength with respect to such [drug](/usc/42/11851.md?p=4), not later than 30 days after the date of receipt from the [Secretary](/usc/42/1301.md?p=a-6) of the information described in [paragraph (1)](#a-1) for such period, shall provide to the [Secretary](/usc/42/1301.md?p=a-6) a rebate that is equal to the amount specified in [subsection (b)](#b) for such dosage form and strength with respect to such [drug](/usc/42/11851.md?p=4) for such period.
  - (3) **Transition rule for reporting—** The [Secretary](/usc/42/1301.md?p=a-6) may, for each rebatable [covered part D drug](/usc/42/1395w–151.md?p=a-2), delay the timeframe for reporting the information and rebate amount described in subparagraphs (A) and (B) of such paragraph for the applicable periods beginning October 1, 2022, and October 1, 2023, until not later than December 31, 2025.
- (b) **Rebate amount—**
  - (1) **In general—**
    - (A) **Calculation—** For purposes of this section, the amount specified in this subsection for a dosage form and strength with respect to a part D rebatable [drug](/usc/42/11851.md?p=4) and applicable period is, subject to [subparagraph (C)](#b-1-C), [paragraph (5)(B)](#b-5-B), and [paragraph (6)](#b-6), the estimated amount equal to the product of—
      - (i) subject to subparagraph (B) of this paragraph, the total number of units of such dosage form and strength for each rebatable [covered part D drug](/usc/42/1395w–151.md?p=a-2) dispensed under this part during the applicable period; and
      - (ii) the amount (if any) by which—
        - (I) the annual manufacturer price (as determined in [paragraph (2)](#b-2)) paid for such dosage form and strength with respect to such part D rebatable [drug](/usc/42/11851.md?p=4) for the period; exceeds
        - (II) the inflation-adjusted payment amount determined under [paragraph (3)](#b-3) for such dosage form and strength with respect to such part D rebatable [drug](/usc/42/11851.md?p=4) for the period.
    - (B) **Excluded units—** For purposes of [subparagraph (A)(i)](#b-1-A-i), beginning with plan year 2026, the [Secretary](/usc/42/1301.md?p=a-6) shall exclude from the total number of units for a dosage form and strength with respect to a part D rebatable [drug](/usc/42/11851.md?p=4), with respect to an applicable period, units of each dosage form and strength of such part D rebatable [drug](/usc/42/11851.md?p=4) for which the manufacturer provides a discount under the program under [section 256b of this title](/usc/42/256b.md).
    - (C) **Reduction or waiver for shortages and severe supply chain disruptions—** The [Secretary](/usc/42/1301.md?p=a-6) shall reduce or waive the amount under [subparagraph (A)](#b-1-A) with respect to a part D rebatable [drug](/usc/42/11851.md?p=4) and an applicable period—
      - (i) in the case of a part D rebatable [drug](/usc/42/11851.md?p=4) that is described as currently in shortage on the shortage list in effect under [section 356e of title 21](/usc/21/356e.md) at any point during the applicable period;
      - (ii) in the case of a generic part D rebatable [drug](/usc/42/11851.md?p=4) (described in [subsection (g)(1)(C)(ii)](#g-1-C-ii)) or a biosimilar (defined as a biological product licensed under [section 262(k) of this title](/usc/42/262.md?p=k)), when the [Secretary](/usc/42/1301.md?p=a-6) determines there is a severe supply chain disruption during the applicable period, such as that caused by a natural [disaster](/usc/42/5204.md?p=2) or other unique or unexpected event; and
      - (iii) in the case of a generic Part[^1] D rebatable [drug](/usc/42/11851.md?p=4) (as so described), if the [Secretary](/usc/42/1301.md?p=a-6) determines that without such reduction or waiver, the [drug](/usc/42/11851.md?p=4) is likely to be described as in shortage on such shortage list during a subsequent applicable period.
  - (2) **Determination of annual manufacturer price—** The annual manufacturer price determined under this paragraph for a dosage form and strength, with respect to a part D rebatable [drug](/usc/42/11851.md?p=4) and an applicable period, is the sum of the products of—
    - (A) the average manufacturer price (as defined in [subsection (g)(6)](#g-6)) of such dosage form and strength, as calculated for a unit of such [drug](/usc/42/11851.md?p=4), with respect to each of the calendar quarters of such period; and
    - (B) the ratio of—
      - (i) the total number of units of such dosage form and strength reported under [section 1396r–8 of this title](/usc/42/1396r–8.md) with respect to each such calendar quarter of such period; to
      - (ii) the total number of units of such dosage form and strength reported under [section 1396r–8 of this title](/usc/42/1396r–8.md) with respect to such period, as determined by the [Secretary](/usc/42/1301.md?p=a-6).
  - (3) **Determination of inflation-adjusted payment amount—** The inflation-adjusted payment amount determined under this paragraph for a dosage form and strength with respect to a part D rebatable [drug](/usc/42/11851.md?p=4) for an applicable period, subject to [paragraph (5)](#b-5), is—
    - (A) the benchmark period manufacturer price determined under [paragraph (4)](#b-4) for such dosage form and strength with respect to such [drug](/usc/42/11851.md?p=4) and period; increased by
    - (B) the percentage by which the applicable period CPI–U (as defined in [subsection (g)(5)](#g-5)) for the period exceeds the benchmark period CPI–U (as defined in [subsection (g)(4)](#g-4)).
  - (4) **Determination of benchmark period manufacturer price—** The benchmark period manufacturer price determined under this paragraph for a dosage form and strength, with respect to a part D rebatable [drug](/usc/42/11851.md?p=4) and an applicable period, is the sum of the products of—
    - (A) the average manufacturer price (as defined in [subsection (g)(6)](#g-6)) of such dosage form and strength, as calculated for a unit of such [drug](/usc/42/11851.md?p=4), with respect to each of the calendar quarters of the payment amount benchmark period (as defined in [subsection (g)(3)](#g-3)); and
    - (B) the ratio of—
      - (i) the total number of units reported under [section 1396r–8 of this title](/usc/42/1396r–8.md) of such dosage form and strength with respect to each such calendar quarter of such payment amount benchmark period; to
      - (ii) the total number of units reported under [section 1396r–8 of this title](/usc/42/1396r–8.md) of such dosage form and strength with respect to such payment amount benchmark period.
  - (5) **Special treatment of certain drugs and exemption—**
    - (A) **Subsequently approved drugs—** In the case of a part D rebatable [drug](/usc/42/11851.md?p=4) first approved or licensed by the Food and [Drug](/usc/42/11851.md?p=4) [Administration](/usc/42/1301.md?p=a-10) after October 1, 2021, subparagraphs [(A)](#b-4-A) and [(B)](#b-4-B) of paragraph (4) shall be applied as if the term “payment amount benchmark period” were defined under [subsection (g)(3)](#g-3) as the first calendar year beginning after the day on which the [drug](/usc/42/11851.md?p=4) was first marketed and [subparagraph (B)](#b-3-B) of paragraph (3) shall be applied as if the term “benchmark period CPI–U” were defined under [subsection (g)(4)](#g-4) as if the reference to “January 2021” under such subsection were a reference to “January of the first year beginning after the date on which the [drug](/usc/42/11851.md?p=4) was first marketed”.
    - (B) **Treatment of new formulations—**
      - (i) **In general—** In the case of a part D rebatable [drug](/usc/42/11851.md?p=4) that is a line extension of a part D rebatable [drug](/usc/42/11851.md?p=4) that is an oral solid dosage form, the [Secretary](/usc/42/1301.md?p=a-6) shall establish a formula for determining the rebate amount under [paragraph (1)](#b-1) and the inflation adjusted payment amount under [paragraph (3)](#b-3) with respect to such part D rebatable [drug](/usc/42/11851.md?p=4) and an applicable period, consistent with the formula applied under subsection (c)(2)(C) of [section 1396r–8 of this title](/usc/42/1396r–8.md) for determining a rebate obligation for a rebate period under such section.
      - (ii) **Line extension defined—** In this subparagraph, the term “line extension” means, with respect to a part D rebatable [drug](/usc/42/11851.md?p=4), a new formulation of the [drug](/usc/42/11851.md?p=4), such as an extended release formulation, but does not include an [abuse](/usc/42/1397j.md?p=1)-deterrent formulation of the [drug](/usc/42/11851.md?p=4) (as determined by the [Secretary](/usc/42/1301.md?p=a-6)), regardless of whether such [abuse](/usc/42/1397j.md?p=1)-deterrent formulation is an extended release formulation.
    - (C) **Selected drugs—** In the case of a part D rebatable [drug](/usc/42/11851.md?p=4) that is a selected [drug](/usc/42/11851.md?p=4) (as defined in [section 1320f–1(c) of this title](/usc/42/1320f–1.md?p=c)) with respect to a price applicability period (as defined in [section 1320f(b)(2) of this title](/usc/42/1320f.md?p=b-2)), in the case such [drug](/usc/42/11851.md?p=4) is no longer considered to be a selected [drug](/usc/42/11851.md?p=4) under [section 1320f–1(c) of this title](/usc/42/1320f–1.md?p=c), for each applicable period (as defined under [subsection (g)(7)](#g-7)) beginning after the price applicability period with respect to such [drug](/usc/42/11851.md?p=4), subparagraphs [(A)](#b-4-A) and [(B)](#b-4-B) of paragraph (4) shall be applied as if the term “payment amount benchmark period” were defined under [subsection (g)(3)](#g-3) as the last year beginning during such price applicability period with respect to such selected [drug](/usc/42/11851.md?p=4) and [subparagraph (B)](#b-3-B) of paragraph (3) shall be applied as if the term “benchmark period CPI–U” were defined under [subsection (g)(4)](#g-4) as if the reference to “January 2021” under such subsection were a reference to “January of the last year beginning during such price applicability period with respect to such [drug](/usc/42/11851.md?p=4)”.
  - (6) **Reconciliation in case of revised information—** The [Secretary](/usc/42/1301.md?p=a-6) shall provide for a method and process under which, in the case where a [PDP sponsor](/usc/42/1395w–151.md?p=a-13) of a [prescription drug plan](/usc/42/1395w–151.md?p=a-14) or an MA organization offering an [MA–PD plan](/usc/42/1395w–151.md?p=a-9) submits revisions to the number of units of a rebatable [covered part D drug](/usc/42/1395w–151.md?p=a-2) dispensed, the [Secretary](/usc/42/1301.md?p=a-6) determines, pursuant to such revisions, adjustments, if any, to the calculation of the amount specified in this subsection for a dosage form and strength with respect to such part D rebatable [drug](/usc/42/11851.md?p=4) and an applicable period and reconciles any overpayments or underpayments in amounts paid as rebates under this subsection. Any identified underpayment shall be rectified by the manufacturer not later than 30 days after the date of receipt from the [Secretary](/usc/42/1301.md?p=a-6) of information on such underpayment.
- (c) **Rebate deposits—** Amounts paid as rebates under [subsection (b)](#b) shall be deposited into the [Medicare Prescription Drug Account](/usc/42/1395w–151.md?p=a-10) in the Federal Supplementary Medical Insurance Trust Fund established under [section 1395t of this title](/usc/42/1395t.md).
- (d) **Information—** For purposes of carrying out this section, the [Secretary](/usc/42/1301.md?p=a-6) shall use information submitted by—
  - (1) manufacturers under [section 1396r–8(b)(3) of this title](/usc/42/1396r–8.md?p=b-3);
  - (2) [States](/usc/42/619.md?p=5) under [section 1396r–8(b)(2)(A) of this title](/usc/42/1396r–8.md?p=b-2-A); and
  - (3) [PDP sponsors](/usc/42/1395w–151.md?p=a-13) of [prescription drug plans](/usc/42/1395w–151.md?p=a-14) and MA organization offering [MA–PD plans](/usc/42/1395w–151.md?p=a-9) under this part.
- (e) **Civil money penalty—** If a manufacturer of a part D rebatable [drug](/usc/42/11851.md?p=4) has failed to comply with the requirement under [subsection (a)(2)](#a-2) with respect to such [drug](/usc/42/11851.md?p=4) for an applicable period, the manufacturer shall be subject to a civil money penalty in an amount equal to 125 percent of the amount specified in [subsection (b)](#b) for such [drug](/usc/42/11851.md?p=4) for such period. The provisions of [section 1320a–7a of this title](/usc/42/1320a–7a.md) (other than [subsections (a)](#a) (with respect to amounts of penalties or additional assessments) and (b)) shall apply to a civil money penalty under this subsection 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) **Limitation on administrative or judicial review—** There shall be no administrative or judicial review of any of the following:
  - (1) The determination of units under this section.
  - (2) The determination of whether a [drug](/usc/42/11851.md?p=4) is a part D rebatable [drug](/usc/42/11851.md?p=4) under this section.
  - (3) The calculation of the rebate amount under this section.
- (g) **Definitions—** In this section:
  - (1) **Part D rebatable drug—**
    - (A) **In general—** Except as provided in [subparagraph (B)](#g-1-B), the term “part D rebatable [drug](/usc/42/11851.md?p=4)” means, with respect to an applicable period, a [drug](/usc/42/11851.md?p=4) or biological described in [subparagraph (C)](#g-1-C) that is a [covered part D drug](/usc/42/1395w–151.md?p=a-2) (as such term is defined under [section 1395w–102(e) of this title](/usc/42/1395w–102.md?p=e)).
    - (B) **Exclusion—**
      - (i) **In general—** Such term shall, with respect to an applicable period, not include a [drug](/usc/42/11851.md?p=4) or biological if the average annual total cost under this part for such period per individual who uses such a [drug](/usc/42/11851.md?p=4) or biological, as determined by the [Secretary](/usc/42/1301.md?p=a-6), is less than, subject to [clause (ii)](#g-1-B-ii), $100, as determined by the [Secretary](/usc/42/1301.md?p=a-6) using the most recent data available or, if data is not available, as estimated by the [Secretary](/usc/42/1301.md?p=a-6).
      - (ii) **Increase—** The dollar amount applied under [clause (i)](#g-1-B-i)—
        - (I) for the applicable period beginning October 1, 2023, shall be the dollar amount specified under such clause for the applicable period beginning October 1, 2022, increased by the percentage increase in the consumer price index for all urban consumers ([United States](/usc/42/1301.md?p=a-2) city average) for the 12-month period beginning with October of 2023; and
        - (II) for a subsequent applicable period, shall be the dollar amount specified in this clause for the previous applicable period, increased by the percentage increase in the consumer price index for all urban consumers ([United States](/usc/42/1301.md?p=a-2) city average) for the 12-month period beginning with October of the previous period.

      Any dollar amount specified under this clause that is not a multiple of $10 shall be rounded to the nearest multiple of $10.

    - (C) **Drug or biological described—** A [drug](/usc/42/11851.md?p=4) or biological described in this subparagraph is a [drug](/usc/42/11851.md?p=4) or biological that, as of the first day of the applicable period involved, is—
      - (i) a [drug](/usc/42/11851.md?p=4) approved under a new [drug](/usc/42/11851.md?p=4) application under [section 355(c) of title 21](/usc/21/355.md?p=c);
      - (ii) a [drug](/usc/42/11851.md?p=4) approved under an abbreviated new [drug](/usc/42/11851.md?p=4) application under [section 355(j) of title 21](/usc/21/355.md?p=j), in the case where—
        - (I) the reference listed [drug](/usc/42/11851.md?p=4) approved under [section 355(c) of title 21](/usc/21/355.md?p=c), [including](/usc/42/1301.md?p=b) any “authorized generic [drug](/usc/42/11851.md?p=4)” (as that term is defined in [section 355(t)(3) of title 21](/usc/21/355.md?p=t-3)), is not being marketed, as identified in the Food and [Drug](/usc/42/11851.md?p=4) [Administration](/usc/42/1301.md?p=a-10)’s National Drug Code Directory;
        - (II) there is no other [drug](/usc/42/11851.md?p=4) approved under [section 355(j) of title 21](/usc/21/355.md?p=j) that is rated as therapeutically equivalent (under the Food and [Drug](/usc/42/11851.md?p=4) [Administration](/usc/42/1301.md?p=a-10)’s most recent publication of “Approved [Drug](/usc/42/11851.md?p=4) Products with Therapeutic Equivalence Evaluations”) and that is being marketed, as identified in the Food and [Drug](/usc/42/11851.md?p=4) [Administration](/usc/42/1301.md?p=a-10)’s National Drug Code Directory;
        - (III) the manufacturer is not a “first applicant” during the “180-day exclusivity period”, as those terms are defined in [section 355(j)(5)(B)(iv) of title 21](/usc/21/355.md?p=j-5-B-iv); and
        - (IV) the manufacturer is not a “first approved applicant” for a competitive generic therapy, as that term is defined in [section 355(j)(5)(B)(v) of title 21](/usc/21/355.md?p=j-5-B-v); or
      - (iii) a biological licensed under [section 262 of this title](/usc/42/262.md).
  - (2) **Unit—** The term “unit” means, with respect to a part D rebatable [drug](/usc/42/11851.md?p=4), the lowest dispensable amount (such as a capsule or tablet, milligram of molecules, or grams) of the part D rebatable [drug](/usc/42/11851.md?p=4), as reported under [section 1396r–8 of this title](/usc/42/1396r–8.md).
  - (3) **Payment amount benchmark period—** The term “payment amount benchmark period” means the period beginning January 1, 2021, and ending in the month immediately prior to October 1, 2021.
  - (4) **Benchmark period CPI–U—** The term “benchmark period CPI–U” means the consumer price index for all urban consumers ([United States](/usc/42/1301.md?p=a-2) city average) for January 2021.
  - (5) **Applicable period CPI–U—** The term “applicable period CPI–U” means, with respect to an applicable period, the consumer price index for all urban consumers ([United States](/usc/42/1301.md?p=a-2) city average) for the first month of such applicable period.
  - (6) **Average manufacturer price—** The term “average manufacturer price” has the meaning, with respect to a part D rebatable [drug](/usc/42/11851.md?p=4) of a manufacturer, given such term in [section 1396r–8(k)(1) of this title](/usc/42/1396r–8.md?p=k-1), with respect to a covered outpatient [drug](/usc/42/11851.md?p=4) of a manufacturer for a rebate period under [section 1396r–8 of this title](/usc/42/1396r–8.md).
  - (7) **Applicable period—** The term “applicable period” means a 12-month period beginning with October 1 of a year (beginning with October 1, 2022).
- (h) **Implementation for 2022, 2023, and 2024—** The [Secretary](/usc/42/1301.md?p=a-6) shall implement this section for 2022, 2023, and 2024 by program instruction or other forms of program guidance.

## Footnotes

[^1]: So in original. Probably should not be capitalized.

## Source credit

(Aug. 14, 1935, ch. 531, title XVIII, § 1860D–14B, as added Pub. L. 117–169, title I, § 11102(a), Aug. 16, 2022, 136 Stat. 1871.)