Branded Prescription Drug

On August 13, 2021, the IRS released a Chief Counsel Advice (“CCA”) (CCA 202132009) addressing the tax treatment of intercompany reimbursements of the Branded Prescription Drug (“BPD”) fee, a non-deductible excise tax imposed by the Patient Protection and Affordable Care Act on entities that manufacture or import branded prescription drugs for sale to specified government programs. The CCA concludes that intercompany reimbursements of the BPD fee are not per se excludable from gross income, but rather, the inclusion or exclusion of the reimbursement depends on whether the entity paying the fee was the beneficiary of the payment under the facts and circumstances. For pharmaceutical companies subject to the BPD fee, the CCA stops short of providing certainty that reimbursements of the fee are per se excludable, but nevertheless, offers useful guidance on how the reimbursements might be structured to support exclusion in many cases. Outside of the pharmaceutical industry, companies in other industries that pay and receive intercompany reimbursements of other material non-deductible costs may also find the CCA’s guidance to be instructive by analogy.
Continue Reading IRS CCA Addresses Intercompany Reimbursements of Branded Prescription Drug Fee: Guidance May be Relevant to Taxpayers Across Industries with Material Non-Deductible Expenses