SECTION 2. BACKGROUND

.01 Sections 1191 through 1198 of the Social Security Act (SSA), added by §§ 11001 and 11002 of Public Law 117169, 136 Stat. 1818 (August 16, 2022), commonly referred to as the Inflation Reduction Act of 2022 (IRA), require the Secretary of Health and Human Services to establish a Medicare prescription drug price negotiation program (Program) to negotiate maximum fair prices (MFPs) for certain high expenditure, single-source drugs covered under Medicare. Under the Program, the Secretary of Health and Human Services must, among other things: (1) publish a list of selected drugs in accordance with § 1192 of the SSA; (2) enter into agreements with willing manufacturers of selected drugs in accordance with § 1193 of the SSA; and (3) negotiate MFPs for such selected drugs in accordance with § 1194 of the SSA. Under § 1193(a)(3) of the SSA, manufacturers of selected drugs that choose to enter into agreements with the Secretary of Health and Human Services and that agree to an MFP commit to provide access

to selected drugs at the negotiated prices to MFP-eligible individuals (as defined in § 1191(c)(2) of the SSA), as well as to pharmacies and other dispensers, hospitals, physicians, other providers of services, and suppliers with respect to such individuals.

.02 Section 5000D, added to the Code by § 11003 of the IRA, imposes the § 5000D tax on the sale by the manufacturer, producer, or importer (manufacturer or taxpayer) of any designated drug ² during a day that falls within a period described in § 5000D(b) (statutory period). The amount of § 5000D tax imposed on such a manufacturer equals the amount that causes the ratio of (1) the § 5000D tax, divided by (2) the sum of the § 5000D tax and the price for which the designated drug was sold, when such ratio is expressed as a percentage, to equal the “applicable percentage.” Section 5000D(a). .03 Section 5000D(d) defines the term “applicable percentage” as follows: (1) in the case of sales of a designated drug during the first 90 days in a statutory period with respect to such drug, 65 percent; (2) in the case of sales of such drug during the 91st day through the 180th day in a statutory period with respect to such drug, 75 percent; (3) in the case of sales of such drug during the 181st day through the 270th day in a statutory period with respect to such drug, 85 percent; and (4) in the case of sales of such drug during any subsequent day in a statutory period, 95 percent.