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Annual Fee on Branded Prescription Drug Companies Under the Affordable Care Act


Section 9008 of the Affordable Care Act (ACA), as amended, directs branded prescription drug companies to pay to the Secretary of the Treasury fees totaling $2.5 billion in 2011, $2.8 billion in 2012, and $2.8 billion in 2013. Companies are required to pay their fees to the Department of the Treasury (Treasury) each year by September 30. An amount equal to the fees received by Treasury each year is to be transferred to the Federal Supplementary Medical Insurance (Medicare Part B) Trust Fund (hereinafter referred to as the Trust Fund). The total annual fee amount to be paid will rise to $4.1 billion in 2018, then will return to $2.8 billion in 2019 and remain at that level thereafter.


We requested from CMS the total amount received by the Trust Fund for the 2011 and 2012 fee years and the dates these transfers were completed. We then compared these data to the Trust Fund data publicly available on Treasury's Web site. We also requested CMS's policies and procedures, conducted interviews, and sent questionnaires to the agency regarding these fees.


We found that the Trust Fund received $2.5 billion for the 2011 fee, which equals the full amount that was to be paid by the companies for 2011. Of this amount, $1.876 billion was received by the Trust Fund in September 2011 and $624 million was received in December 2011. For the 2012 fee, the Trust Fund received all but $245,000 of the $2.8 billion amount that the ACA provides for the 2012 fee. The Trust Fund received $2.184 billion in September 2012, $603 million in April 2013, and $13 million in May 2013. According to CMS, after we sent our data request for the 2011 and 2012 fee years, the Trust Fund received approximately $2.6 billion in October 2013 and $199 million in December 2013, which is all but $693,000 of the $2.8 billion amount that the ACA provides for the 2013 fee. This means that between September 2011 and December 2013, the Trust Fund received all but $938,000 of the total $8.1 billion amount the ACA provides for the first 3 fee years. For the 2011 and 2012 fees, CMS used data that it received from Treasury to report on the fee's activity and make actuarial projections.


Although the funds from the annual fee are allocated to the Part B Trust Fund, the ACA grants to Treasury the responsibility of administering the fee process, including transferring the fee to the Trust Fund. To the extent that the fees were not in the Trust Fund, the Trust Fund may have missed an opportunity to earn interest income on these fees. Our results indicate that it may be beneficial for CMS to periodically monitor the status of this fee in the Trust Fund, and to contact Treasury if CMS finds that the full amount to be collected under the ACA each year has not been received.