IRS Issues Guidance on the Dispute Resolution Process for the Preliminary Fee Calculation of the 2011 Fee Imposed on Manufacturers and Importers of Branded Prescription Drugs


On May 2, 2011, the Internal Revenue Service (the "IRS") issued Revenue Procedure 2011-24 (the "Revenue Procedure"), which establishes a dispute resolution process for the preliminary fee calculation for the 2011 fee imposed on certain manufacturers and importers of branded prescription drugs pursuant to the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the "ACA"). As further explained below, in order to participate in the dispute resolution process, a "covered entity" must submit a written error report to the IRS that is postmarked no later than June 1, 2011. This Tax Alert provides background on the annual fee and a summary of the dispute resolution process established by the Revenue Procedure.


Section 9008 of the ACA imposes an annual fee (the "Fee") on each "covered entity" (i.e., any manufacturer or importer with gross receipts from sales of branded prescription drugs) with gross receipts of more than $5 million from certain sales of branded prescription drugs. In Notice 2010-71 (the "Initial Notice"), the IRS provided guidance on the calculation of the Fee. For 2011, the aggregate Fee to be paid by all covered entities is $2.5 billion. The IRS will apportion this Fee among the covered entities based on each covered entity's proportionate share of branded prescription drug sales that are taken into account during the applicable Sales Year. For a detailed description of the Initial Notice, including definitions of these terms and the methodology for calculating the Fee, see Reed Smith's Tax Alert 10-278.

Please see full alert below for more information.

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