SECTION 4. PROCEDURES FOR

DISPUTING A 2011 PRELIMINARY FEE CALCULATION

.01 Submission of claimed error(s) to the IRS

Upon receipt of the notification that contains its 2011 preliminary fee calculation from the IRS, a covered entity should review the data contained in the notification. If the covered entity believes that the notification contains one or more errors in the mathematical calculation of the fee, the orphan drug or rebate data, the Program drug sales data, or any other error, the covered entity must provide a written error report to the IRS postmarked by June 1, 2011, in order for a correction to the claimed error(s) to be considered by the IRS. If a designated entity filed a Form 8947 on behalf of the covered entity, the designated entity must also file any error report for the covered entity.

.02 Program drug sales data errors If a covered entity asserts that there has been one or more errors in drug sales data, the entity must submit a separate error report for each Program with its asserted errors. Each report must include the following information:

(1) Entity name, entity number (if applicable, from Part I(a) of the Form 8947), address, and Employer Identification Number (EIN) as previously reported on the Form 8947.

(2) The name, telephone number, and e-mail address (if available) of one or more employees or representatives of the entity with whom the Agencies may discuss the claimed errors. If the representative is not an employee of the entity, a Form 2848, Power of Attorney and Declaration of Rep-

program, the Medicaid program, and any program under which branded prescription drugs are procured by the Department of Veterans Affairs (VA), Department of Defense (DOD), and DOD’s TRICARE retail pharmacy program (the Programs). Fees collected under section 9008 are credited to the Medicare Part B trust fund.

.02 Section 9008 sets the aggregate annual fee for all covered entities. For 2011, the aggregate fee is $2.5 billion. This aggregate fee is apportioned among the covered entities for each year based on each covered entity’s proportionate share of branded prescription drug sales that are taken into account during the previous calendar year. The Secretary of the Treasury is to establish an annual payment date that is no later than September 30 of each year.

.03 Special rules in section 9008 exclude sales of certain orphan drugs from “branded prescription drug sales”; provide that a covered entity’s branded prescription drug sales between $5 million and $400 million will only partially be taken into account in determining a covered entity’s proportionate share of sales; and provide a controlled group rule so that all persons that are treated as a single employer under certain provisions of the Internal Revenue Code (Code) will be treated as a single covered entity.

.04 Section 9008 requires the Secretary of Health and Human Services, the Secretary of Veterans Affairs, and the Secretary of Defense (the Agencies) to report to the Secretary of the Treasury, at such time and in such manner as the Secretary of the Treasury prescribes, the total branded prescription drug sales under each Secretary’s jurisdiction. The provision includes the detailed information to be included in the reports by the respective Secretaries for each specified government program.

.05 In Notice 2011–9, the Treasury Department and the Internal Revenue Service (IRS) described a proposed methodology for calculating the section 9008 fee and the approach that the IRS will use to perform a preliminary 2011 fee calculation for each covered entity. The IRS will mail each covered entity notification of its preliminary fee calculation for 2011 by May 16, 2011. (The IRS requested that comments on this notice be submitted by June 15, 2011.) Under that methodology, the IRS will calculate each covered entity’s fee for 2011 using data from the

2009 sales year. As set forth in Notice 2011–9, the IRS asked covered entities to submit a Form 8947, Report of Branded Prescription Drug Information, to the IRS by February 11, 2011, to provide data on branded prescription drugs, orphan drugs, and rebates. In addition, any controlled group treated as a single covered entity under section 9008(d)(2) was asked to identify on Form 8947 a single person as the “designated entity” to act for the controlled group with respect to the section 9008 fee.

.06 From the data on the Forms 8947, the IRS compiled a list of National Drug Codes (NDCs) for branded prescription drugs sold to the Programs and, after appropriate due diligence, provided that list to the Agencies. The Agencies provided sales data to the IRS on the branded prescription drug sales for the 2009 sales year by Program and NDC.

.07 After receiving the sales data from the Agencies, the IRS will make adjustments for orphan drug sales and rebates, and then calculate each covered entity’s branded prescription drug sales taken into account for purposes of the ratio set forth in section 9008(b)(1). The IRS will then provide a preliminary fee calculation for 2011 for each covered entity by dividing each covered entity’s branded prescription drug sales taken into account under section 9008(b)(2) by the aggregate branded prescription drug sales taken into account for all covered entities and multiplying that fraction by the applicable amount for the year as set forth in section 9008(b)(4). The IRS will mail each covered entity notification of its preliminary fee calculation for 2011 by May 16, 2011. .08 The notification of the preliminary fee calculation for 2011 will include: (1) the covered entity’s preliminary fee calculation; (2) the covered entity’s branded prescription drug sales for 2009, by NDC, for each Program; (3) the covered entity’s branded prescription drug sales for 2009 taken into account after application of section 9008(b)(2); and (4) the aggregate branded prescription drug sales for 2009 taken into account for all covered entities. Covered entities will be able to review this information before the June 15, 2011, deadline for commenting on the methodology proposal in Notice 2011–9.

.09 The IRS will mail a final fee calculation for 2011 to each covered entity by August 15, 2011, and payment of the fee

2011–20 I.R.B. 788 May 16, 2011

than 2007). This spreadsheet file must be placed in a folder separate from the Program sales data folder(s). The folder and file names must distinguish these items from the Program sales data folder and files. These folders must also contain the corresponding files for the asserted errors.

(d) A separate narrative for each Microsoft Excel spreadsheet file must be submitted and must be in Microsoft Word format (no version newer than 2007).

(e) Supporting documentation for each Microsoft Excel spreadsheet file must be in Adobe Portable Document Format (no version newer than 8.0), if not available in Microsoft Word or Excel format.

(2) A covered entity must also provide an additional copy of its error report(s) and supporting documentation in a separate folder labeled “IRS Comprehensive Error Report.”

.05 Alternative Formats Formats for submission other than Microsoft Word or Excel, or Adobe Portable Document format may be arranged on a case-by-case basis, if necessary, by contacting the first IRS representative listed in Section 6 of this revenue procedure.

.06 Address for submission Error reports and all supporting documentation must be mailed to:

Department of the Treasury Internal Revenue Service 1973 N. Rulon White Boulevard, Mail Stop 4916 Ogden, UT 84404