IRS Guidance On New Excise Tax On Branded Pharmaceutical Companies: Filing Due January 21, 2011

In a prior article dated May 25, 2010, we advised of a new excise tax on branded pharmaceutical manufacturers. We indicated that the Patient Protection and Affordable Care Act ("PPACA") required the Internal Revenue Service ("IRS") to publish guidance "necessary to carry out the purpose" of the section in which the tax is included. The IRS has now issued that guidance ("the Guidance").

The Guidance sets forth a proposed methodology for calculating the fee, as well as the requirements for pharmaceutical manufacturers subject to the tax. The fee is to be calculated by the IRS based on information obtained from government agencies which either reimburse for, or procure, branded prescription drugs, including those reimbursed under or purchased by Medicare Parts B and D, Medicaid, the VA, DOD and TRICARE. A description of the methodology for calculation of the fee is found on pages 2-7 of the Guidance.

What is required of pharmaceutical companies? Companies do not calculate the fees; they just provide certain information to the IRS. IRS then obtains information from the appropriate government agencies. Under the Guidance, pharmaceutical companies subject to the tax would have to file a Form 8947 annually, by December 15th of each year except that the initial submission must be made by January 21, 2011.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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