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Interest Calculation for Late Rebate Payments

In accordance with section 1927(b)(1)(A) of the Social Security Act (the Act) and the terms of the National Medicaid Drug Rebate Agreement (NDRA), for purposes of calculating interest on late rebate payments, manufacturers have 37 calendar days to pay rebates before interest begins to accrue.  The following state and manufacturer program releases can be referenced for further detailed information:

State Program Releases:

  • State Release #29 (PDF, 690.21 KB) Policy Clarification for the Calculation of Interest under Section V(b) of the NDRA
  • State Release #48 (PDF, 33.17 KB) Tolerance Threshold for Interest
  • State Release #65 (PDF, 26.35 KB) Failure to Pay Interest
  • State Release #88 (PDF, 13.83 KB) Interest Payments
  • State Release #98 (PDF, 57.12 KB) Clarification of Manufacturer Interest Calculation
  • State Release #114 (PDF, 42.88 KB) Improper Rebate Withholding & Interest Implications for Manufacturers
  • State Release #121 (PDF, 28.2 KB) Interest Clarification when Prior Period Adjustments (PPAs) are Submitted
  • State Release #154 (PDF, 87.42 KB) Clarification on Postmark Dates for Web Invoices
  • State Release #166 (PDF, 152.47 KB) Clarification of Postmark Dates for Purposes of Calculating Interest

Manufacturer Program Releases:

Interest is calculated as follows:

  1. Obtain yield rates of weekly auction of 13-Week Treasury bills under Investment Rate % or in the DDR.
  2. Determine the date range for which interest is owed beginning with the 38th day from the invoice postmark date.
  3. Total the yield rates of each weekly auction for the period during which interest applies.
  4. Divide that total by the number of yield rates (i.e., the number of weeks) to determine the average interest rate.
  5. Multiply the average interest rate by the amount of unpaid rebate to determine the amount of interest due.
  6. Divide the amount of interest due by 365 days to determine the daily interest amount due.
  7. Multiply the daily interest amount by the number of days for which interest is owed. This amount represents the total interest owed.

Contact Information

Questions on the Interest Calculation?  Email rxdrugpolicy@cms.hhs.gov.

Disclaimer: Please note that the information provided on this web page does not bind or obligate the Centers for Medicare and Medicaid Services (CMS). The statements included on this web page are intended to provide information on Interest Calculation for Late Rebate Payments and does not in any way revise or modify the requirements set forth in Section 1927 of the Act, the national drug rebate agreement (NDRA), subsequent program releases, or regulations.

Page last updated on January 22, 2021