Pharma and Life Sciences Tax News: Vol. 10, No.10:

On August 15, the IRS issued temporary and proposed regulations on the annual fee imposed on covered entities engaged in the business of manufacturing or importing branded prescription drugs. The fee, which was enacted by the Patient Protection and Affordable Care Act (PPACA), generally applies to covered entities with aggregate branded prescription drug sales of over $5 million and is based on sales of branded prescription drugs in the sales year that corresponds to the fee year.

The temporary regulations outline the actions drug manufacturers must take before the September 30 due date of each year's fee, including how the fee is to be calculated and adjusted, the process for dispute resolution, how the fee should be paid and treated for tax purposes, and how to make refund claims. The regulations are generally consistent with the approach proposed in previous IRS guidance, but contain certain modifications and additions in response to comments received.

Effective date

The temporary regulations generally apply to any fee on branded prescription drug sales that is due on or after September 30, 2011.

Comment request

Comments on the proposed regulations and requests to schedule a public hearing should be submitted to the IRS by November 16, 2011.