KPMG report: Preparing for the new excise tax under section 5000D on sales of specified drugs
A report that discusses how drug manufacturers and importers are preparing for the new excise tax.
A discussion on how drug manufacturers and importers are preparing for new excise tax
A punitive excise tax imposed under section 5000D on manufacturers and importers of specified drugs that are sold to Medicare and Medicaid was enacted as part of the Prescription Drug Pricing Reform Program in Subtitle B of the Inflation Reduction Act.
Because the excise tax is only imposed if the requirements of the Program are not met, it incentivizes drug manufacturers to negotiate “maximum fair prices” for drugs identified by the Secretary of Health and Human Services (HHS) that meet certain thresholds for government and individual spending. Thus, despite the January 1, 2026 effective date of the ”maximum fair prices,” manufacturers have begun modeling potential financial and portfolio effects of the Program, strategizing business implications for marketing, research and development, and identifying ways to mitigate the tax.
Treasury and the IRS have issued preliminary guidance, including proposed regulations that are solely procedural in nature (read TaxNewsFlash) and Notice 2023-52 (read TaxNewsFlash) that introduced a presumption applicable to the tax calculation.
Read a December 2023 report [PDF 310 KB] prepared by KPMG LLP that discusses how drug manufacturers and importers are preparing for the new excise tax: What’s News in Tax: Preparation for New Excise Tax on Prescription Drugs Sold to Medicare and Medicaid Has Already Begun, Absent Substantive IRS Regulations, Because of Mandatory Price Negotiations
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